SK Hynix says industry woes ‘unprecedented’, to cut investment | Business and Economy

South Korean chipmaker’s third-quarter revenue tumbles 60 p.c amid a surge in inflation.

South Korean chipmaker SK Hynix says the reminiscence chip market is going through an “unprecedented deterioration”, as its third-quarter revenue tumbled 60 p.c amid a surge in inflation.

“Provide will proceed to exceed demand in the interim,” the world’s second-biggest reminiscence chip maker mentioned in an announcement on Wednesday, pointing to a fall in pocket book and smartphone shipments.

The corporate mentioned it plans to cut back its funding subsequent yr by greater than 50 p.c on-year.

The revenue fall comes as red-hot inflation has harm demand for digital gadgets and the reminiscence chips that go in them.

SK Hynix’s working revenue fell to 1.66 trillion received ($1.16bn) within the July-September quarter, from 4.2 trillion ($2.93bn) received a yr earlier. The end result was beneath analysts’ expectations of a 1.87 trillion ($1.31bn) received revenue, in keeping with Refinitiv SmartEstimate.

Costs of DRAM chips, utilized in gadgets and servers, fell by about 20 p.c within the third quarter from the second, SK Hynix mentioned. Costs of NAND Flash chips that serve the information storage market fell greater than 20 p.c.

The lacklustre outcomes echo greater rival Samsung Electronics’ third-quarter earnings stoop and United States peer Micron Expertise Inc’s warnings of a pointy decline in PC and smartphone gross sales.

Chipmakers had loved a powerful post-pandemic demand surge till early this yr, which created a scarcity of sure chips and disrupted the manufacturing of automobiles and varied digital gadgets.

However chip demand has turned sharply weaker in current months, as hovering inflation, rising rates of interest and a dark financial outlook have led customers and companies to tighten their spending.

The worldwide smartphone market contracted 9 p.c on-year in July-September, marking the worst third quarter since 2014, in keeping with evaluation supplier Canalys.

DRAM chip costs are anticipated to fall additional within the present quarter as reminiscence chip firms have misplaced their bargaining energy with prospects who’ve stockpiled chips and now battle to clear them attributable to weak demand, mentioned Wi Min-bok, an analyst at Daishin Securities.

With the reminiscence chip glut seen to final till the primary half of subsequent yr, SK Hynix joins chipmakers which have begun curbing provide and funding. Micron plans to chop investments by greater than 30 p.c subsequent yr. TSMC has additionally lower its 2022 funding plan.

SK Hynix mentioned its 2022 funding is anticipated to be within the “higher vary of 10-20 trillion received” ($7-14bn).

Regardless of the present drop in demand for server reminiscence chips, SK Hynix forecast extra urge for food in the long term as hyper-scale knowledge centres proceed their funding to fulfill development in industries akin to synthetic intelligence (AI), huge knowledge and the metaverse.

Third-quarter income fell 7 p.c on-year to 10.98 trillion received ($7.6bn).

SK Hynix shares had been flat in early morning commerce, versus a 0.3 p.c rise within the wider market

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